Correlation Between X FAB and UNIVERSAL MUSIC

Can any of the company-specific risk be diversified away by investing in both X FAB and UNIVERSAL MUSIC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining X FAB and UNIVERSAL MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between X FAB Silicon Foundries and UNIVERSAL MUSIC GROUP, you can compare the effects of market volatilities on X FAB and UNIVERSAL MUSIC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in X FAB with a short position of UNIVERSAL MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and UNIVERSAL MUSIC.

Diversification Opportunities for X FAB and UNIVERSAL MUSIC

0.54

Correlation Coefficient

X FAB  UNIVERSAL MUSIC

Very weak diversification

The 3 months correlation between XFB and UNIVERSAL is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and UNIVERSAL MUSIC GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL MUSIC GROUP and X FAB is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on X FAB Silicon Foundries are associated (or correlated) with UNIVERSAL MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL MUSIC GROUP has no effect on the direction of X FAB i.e., X FAB and UNIVERSAL MUSIC go up and down completely randomly.

Pair Corralation between X FAB and UNIVERSAL MUSIC

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 2.27 times more return on investment than UNIVERSAL MUSIC. However, X FAB is 2.27 times more volatile than UNIVERSAL MUSIC GROUP. It trades about 0.28 of its potential returns per unit of risk. UNIVERSAL MUSIC GROUP is currently generating about 0.16 per unit of risk. If you would invest  411.00  in X FAB Silicon Foundries on April 20, 2025 and sell it today you would earn a total of  259.00  from holding X FAB Silicon Foundries or generate 63.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

X FAB Silicon Foundries  vs.  UNIVERSAL MUSIC GROUP

X FAB Silicon

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, X FAB exhibited solid returns over the last few months and may actually be approaching a breakup point.

UNIVERSAL MUSIC GROUP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL MUSIC GROUP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, UNIVERSAL MUSIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and UNIVERSAL MUSIC

The main advantage of trading using opposite X FAB and UNIVERSAL MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, UNIVERSAL MUSIC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in UNIVERSAL MUSIC will offset losses from the drop in UNIVERSAL MUSIC's long position.

The idea behind X FAB Silicon Foundries and UNIVERSAL MUSIC GROUP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.